Russian metallurgical holding Novostal-M, a large supplier of billet and structural steel, has announced it plans to build a new steel mill in the Leningrad region. The agreement between the company’s head and the region’s governor was signed on June 16.
According to Novostal-M, the construction works will begin at the end of 2024 or in early 2025. The steel production will be around 1.5 million mt per year and will include billet production and two divisions for rebar, wire rod and other products’ manufacturing. The production will be based on the electric-arc furnace method. The works are scheduled for completion within two to three years. Novostal’s investment in the project will be around 10-15 percent, while the remainder is to be obtained from third parties.
The project will be the third mill for the holding, which already owns Abinskiy SW and Balakovo steel plant. Some market sources believe the agreement is just on paper for now and the project realization will be postponed due to unfavourable local market conditions in Russia. “Either it is a long shot or just a loud announcement. One has to be really optimistic to invest now in Russia,” a trader said, referring to the pressure from sanctions on Russia’s economy and, particularly, on steel demand. Moreover, according to market information, the existing steel assets of Novostal-M are having great trouble selling their materials. Abinskiy has been selling billets to Egypt and Turkey with a lot of issues and at big discounts. Moreover, some sources are confident that the producer is mixing their own billet with ex-Donbass origin material, given the increased production in this occupied Ukrainian region. The material is coming from the captured Ukrainian facilities Makeevka, Enakievo, DEMZ, Alchevsk and, along with billet, Russia’s local market sees an increased flow of longs from Donbass, which actually undermines the sales of domestic suppliers, including Novostal-M.
While local supplies have been increased and the exports of longs have been almost zero, all Russian mills have been suffering from decreasing domestic steel consumption. In the case of long products, in which Novostal-M is going to invest, the decline of the Russian construction sector’s steel consumption reached 15-20 percent, leading to around a 20-25 percent drop in longs production by local mills. Moreover, the situation is expected to worsen, given the pressure from sanction on the construction industry, coupled with the lower purchasing power of the Russian people.